This means trouble for many competitors if Google can pull the hardware execution off, and I beleive they can. It also gives them an immense advantage over the other handset makers because they, by defaut own Android, the "Driod" moniker (through MMI), the IP to implement the newest Android tech in near real time, and most importantly nearly 50% of the world's market share in OS coming out of the gate.

Expect Google to immediately drop margins, and therefore prices across the board while simultaneously raising the bar significantly in terms of functionality and performance, not to mention the tech refresh cycles. I would imagane the refresh cycles will be concentrated in the software side, assited by the hardware which will show no customization of the interface therefore allowing instant adotpion of updates. Expect to see a firmware SIM card, independence from carriers, and fully subsidized smartphones that will probably best the performance of the iPhone 5 before the 2 tech refresh.

What should not be overlooked is how Google is able to hit two birds with one stone here - patent protection AND hardware manufacturing capabilities. From Forbes.com:

Google has just closed its biggest acquisition to date, and surprisingly enough its in the burgeoning world of cellphones. The company announced this morning that it was buying smartphone and tablet maker Motorola Mobility for $12.5 billion in cash, paying a whopping 63% premium on Motorola’s closing share price on Friday.

Shares of Motorola Mobility, traded on the NYSE, shot up by 60% in pre-market trading, while Google’s shareholders didn’t seem to like the deal, sending its shares down by 3% in pre-market trading in New York.

The companies said both boards had approved the deal, which will give Google complete control of the manufacturer of smartphones and tablets like the Xoom, which run the Android operating system.

Google’s CEO and co-founder, Larry Page, said on the company’s official blogthat the acquisition would also “supercharge the entire Android ecosystem,” and boost its patent portfolio, which would “enable us to better protect Android from anti-competitive threats from Microsoft, Apple and other companies.”

"We believe this is the singular most important issue for the smartphone industry at the moment," JPMorgan analyst Rod Hall wrote in a research note Monday.

Google has complained that the current patent system is broken and does not encourage innovation. But that doesn't mean Google isn't interested in acquiring more. The company said it's adding a collection of 1,000 patents from IBM that it acquired in a deal struck last month.

The battle lines in the patent war were drawn earlier in July, in the surprise aftermath of the Nortel patent auction.

Apple's formation of Rockstar Bidco, a super consortium including Research In Motion, Microsoft, Ericsson, Sony and EMC -- the group that won the $4.5 billion auction -- is the best example yet of how the powers are aligning.

The consortium illustrates the establishment of two distinct camps: Google and its partners against the rest of the field.

As relative newcomers to the mobile industry, Google and Apple have very little legal ground to stand on when it comes to connected devices and wireless patents. Apple helped boost its position a bit with the Rockstar Nortel patents acquisition, a move that the Wall Street Journalsays is being reviewed by the Justice department.

But Google is a software company whose fortunes in mobile are riding on the success of smartphone partners like Samsung, Motorola, HTC and LG.

Android-shop Samsung is in a legal battle with its former ally Apple. In April, Apple filed a lawsuit against Samsung for copying its iPhone and iPad. In June, Samsung sued Apple for patent violations.

Motorola, however, is far better positioned to defend the Android camp. Not only does Motorola have far more patents than its nearest competitors, it appears to have more of the key patents that may help the Android camp in a battle against Apple.

"It is interesting to note that Motorola asserted 18 patents against Apple, and sued Apple first, whereas Apple has asserted just six patents against Motorola," Morgan Stanley analyst Ehud Gelblum wrote in a research note last month.

So while Apple might have a Rockstar consortium, Google has a friend with deep patent portfolio.

May I remind readers of Google's true business model from historical posts...

Google's investment history has been phenomenal, besting the vast majority if financial acquisition players and enabling Google to place itself at the top of several diverse markets in a record amount of time. The mobile computing market is but one example or many. It would be unwise to blindly bet against their having throught and strategized this move through. As excerpted from A Realistic Look At The Success Of Google's Investment History:

To begin with, Google apparently realized early on that it could better realize returns by investing shareholder capital through acquisitions. It has actually been quite acquisitive, making 88 purchases over the last 13 year. Last year was Google's most acquisitive year, ever!

Reggie has been wrong on Apple since I started reading this blog(for at least the last year and a half or more) flat wrong on Apple across the board. No other single contributor has had such a massive hard on for a single company and been so wrong.

I will go back to my argument that has remained unchanged. Reggie, you cannot compare a software company(Google) to a Hardware and Software company(Apple) they come from far different histories, carry very different line of products, and absolutely do not share the same audiences when it comes to user profiles and audience awareness. When you say iPhone, people know what that is and what it entails, when you say Android, only the nerds know what the fuck you are talking about. Wake up. When you use your phone you do not associate the HW manufacturer with the operating system UNLESS you are talking about Apple, it is the whole package for most people and very simple. This is intentional and has beena part of Apples industrial design and platform development for the last 20+ years.

The fact you always seem to try and compare Apple with any number of either SW or HW companies(I am pretty sure you tried to say the BB playbook would actually hurt iPad2 sales amongst other completely off base and ridiculous calls). There is no other company that even remotely holds a candle to Apple when it comes to overall company solidness. Until they lose Jobs, they are firmly in the drivers seat when it comes to consumer electronics.

I am not trying to be a prick, and I know you do a lot of research on the subject, but even if you do something wrong really really well, you still don't do it right.

On the one hand, i do from a designer AND engineer POV (am in my projects synthesizing both) not fully agree with the apple POV: While i do agree that their design is well done, it usually comes at the cost of user liberty and control.... i especially dislike the increasing bloatware and vendor-lockin (granted, all major players are doing this: it's just that apple is not differentiating itself in any way regarding this... and this makes apple a no-go for any poweruser that values design AND liberty.... also granted, average joe (sadly) does not care about this, until it bites himself in the ass)

On the other hand, google has in recent history betrayed its design philosophy. One only needs to look at google's major product: websearch. Originally, it was intentionally kept simple, rocksolid and non-annoying.... now they switched it for a "modern"-interface with all kinds of "interactive" and automated features, that make websearching more something that gets in the way, than it helps... if any other provider would offer the old google experience, but with less search-spam, i would instantly leave google, instead of hackfixing their stupid design... simple because google is no longer good old google. Bottom line: Google too has switched from a KISS-design that works for everyone, to a lot of interactive eyecandy and automated toys that get more in the way than they help. And this isn't restricted to google search - it's a generic recent trend.

Right on the buttons! I have called some of the machines in this topic the

"Leader Class DEvices", and applaud Google. It is slightly more populist and/or utilitarian. Only a slight worry is that they, like the Cyber-men in Dr.Who, are building what we need to eventually control us all.

Techno-fan button checked.

But still, once moving computer devices can be tinkered with, they can be scaled down to just what you need (nothing more). Oh, that's slightly dream-wishing...

so the CIA is getting into the hardware end of the mass public telecommunications business...makes perfect sense to me...get your new g-phone, g-pad ect. Apple may be boss now, but google has the backing of the empire, and the empire will not tolerate a little thing like competition interfering with it's goal of creating the ultimate super surveillance state..

If you think bank, people loved Microsoft as well, back in the 80's and early 90's. Then their size and stature combined with likable nimble competitors turned pop public opinion against them. Albeit Apple appears better at marketing (but not necessarily public relations, and if anything worse) than MSFT, history will most likely repeat itself. Many say Apple is so big, has XXX billion in cash, etc. etc. Well, so did every other company (on a relative basis) at the top of its game. The world runs in business and economic cycles and companies tend to fall to paradigm shifts.

IBM --> MSFT --> Apple -->XXXXXXXX no scratch that, Apple will never fail because history stops with the marketer of pretty shiny things!

Do you see how the break in logic sounds, even despite my smartass comment? Apple is a superb company with management that knows how to execute, but too many expect too much akin to perfection from Apple, and at the end of the day, it's still just a C corporation, like everyone else. Oops, did I say something to offend just now?

You know I'm in a jovial mood, I'm baiting the trolls... Come and get it fellas :-)

Instead of making this argument about Apple, can we make it about Google? Google has zero (ZERO!) experience managing hardware. Plus they have failed at much of what they have tried to do in software that is outside of search and search-based advertising.

I agree that Apple is vulnerable, my problem is finding an organization that credibly matches up against Apple's triple-threat skill set (user interface, operating systems, and hardware). You can find organizations that might do better at any one of those, but doing all three simultaneously? Please show me a credible candidate. Google sure as shit doesn't qualify.

What experience did Apple have in handset hardware before they entered the market? Answer: None! And they garner the bulk of industry profits!

What experience did Apple have in consumer music players before the iPod? Answer: None! And they controlled the space after taking control from Sony.

What experience did Google have in mobile OS before the Android acqiusistion? Answer: None! BTW, who owns nearly half the global market share and is still growing faster than all of its competitors, combined? I'd love to fail at such a level!!!

What experience did Google have in Streaming video before Youtube? None!

What experience did Google have in enterprise tech integration and outsourcing services before gmail/Google apps acqisistions? None! And Google is one of the few, if only cloud vendors that actualy threatens MSFT!

Experience is often overrated by those who have it as an excuse for losing to those who didn't. Its execution that rules paramount, not experience. If anything, Apple should be a shining example of such.

Apple's genius was to turn the existing music-playing technology from a dumb cassette player, into a computer. They moved the market into their sweet spot.

The first iPod was a dumb music file player, just like the walkman it competed with. One was stored on digital disc, the other on a hard drive.

I'll give you this one. Google has made some good headway here, adapting an open-source OS (Linux) into a handset OS. Doesn't prove they can work in the hardware market though.

Going from 0 to the leader of the world in 2 1/2 years is a liitle better than "some headway". Come on, buddy!

I am not at all impressed with Google's enterprise offerings. I am forced to use many of them at work.

But they are not trying to impress you, since you are not their client. Your bosses, boss is. Obviously he's impressed since you're forced to use them at work. See what I mean? With the MOT gain, you can bet they'll be deeply engrained into the hardware, software and firmware very soon.

Read the link above detailing Google's investment history and tell me if you still think their execution stinks. Venture firms would kill to have that type of track record.

LOL, fair point about Google's enterprise tools. But I will point this out: yes my boss bought them, but will he keep them? We'll see.

Regarding the first iPod...c'mon Reggie. Weak argument. It might have been a dumb computer, but it was a computer nonetheless, and most importantly, it was a computer with a brilliant interface. The point I am making is that Apple moved the marketplace onto THEIR playing field... as opposed to moving their company onto the market's playing field, which is what Google is trying to do.

Leader of the world, huh? How much money, exactly, has Google made from their Android OS? Google has market share, but not profit share. Apple currently makes 66% of all smartphone profits on 28% of smartphone revenues (http://www.asymco.com/2011/08/02/apple-share-of-phone-revenues-increased...). Now, I will agree that buying market share can be part of an overall winning marketing strategy. But right now, that's all that Google has done: bought market share. Let's not be too hasty to crown Google the victor, they've got a long way to go to make Android a meaningful success.

Now we're talking about Google's investment history? Please don't reframe the argument, I'm more interested in Google's management history. They might be good at investing, but I'm not particularly impressed at their track record of managing.

Google is hitting the ball out of the park at an impressive rate. first the Nokia deal- Nokia being the largest phone manufacturer in the world. then the Sony deal. porting every PS1 title to Android is HUGE. now the Motorola deal. i've been saying for a while now that RIM needed to make a deal with Google, or risk going the way of the dodo. i wasn't aware of their deal with Apple. you'll never get a Blackberry iPhone. with Google, you could have had a Blackberry Android. yet another misstep from RIM. they're doomed...

The Palestinians have a gripe which will be settled when they get some leadership. Israel's tactics are not cool but c'mon, what do you expect? Come to the table, don't throw rocks and you'll see, there will be progress.

I just hope you're not one of these weird people who have never met a Jew or a Palestinian, yet hate one side or the other.

If any company has the ability to out-integrate, out-pretty, and out-innovate Apple, that would be Google. It remains to be seen whether they are as good at product design as they are at software interface design. You are only as good as your last product, or to be more accurate, how your last product was received by the public.

Considering Apple's past and ongoing aggression against Moto for its multi-touch patents alone, this looks like a good acquisition for Google. And by good I mean in a Charlie Sheen trainwrecky kind of way.

It's true. Because if you are granted a patent it means I lose the ability to freely perform certain sequences of steps in using or transforming my own property. In granting you a patent, the government violates my property rights. Patents are incompatible with free markets.

Correct that the government violates your IP. Any patent can be stolen legally by the government for their own use in the interests of national security, but IP does not necessarily mean you lose your freedom to modify your patent. If you wish to change it, it is quite a simple process of addendum to an original patent.

The alternative to not having IP laws is encasing every product with a bomb that detonates when its secrets are revealed. That is both stupid and contrary to advancing technology as a whole.

There's a reason for everything though not necessarily for the reason you think. This includes the real reason for the patent system and it is the USA's defense of Intellectual Property that provides the necsssary and essential driver for talent coming here rather than remainig in the home pirate countries.

"And if a man is extremely desperate for sex, couldn't his gain be greater than the loss suffered by his rape victim, say, if she's a prostitute?

But even if we ignore the ethical and otherproblems with the utilitarian, or wealth-maximization, approach, it is bizarre that utilitarian libertarians are in favor of IP when they have not demonstrated that IP does increase overall wealth"

"virtually every study that attempts to tally the costs and benefits of copyright or patent law either concludes that these schemes cost more than they are worth, that they actually reduce innovation, or the study is inconclusive. There are no studies showing a net gain. There are only repetitions of state propaganda."

Case in point: Music artists generally don't make money from albums anymore. But they do make money from doing shows, with the albums supporting the purchase of tickets to said shows as a marketing vehicle. Popular music shows have tended to be a lot better as far as quality and spectacle. Movies are another good example of this, the theatres are way better quality than they used to be. Lack of effective enforcement of intellectual property I believe is the primary driver of this.

There will always be people who buy Apple because they want an Apple product - and pay through the nose for it. That seems to be Apple's business model. Others will get the same or better functionality from Google phones for half the price. Apple hasn't cared so far. Don't think they will start caring now.

There will always be people who buy Apple because they want an Apple product - and pay through the nose for it.

This is very true, but don't think that Apple is oblivious. I went to buy a notebook yesterday and was dangeriously close to buying a 13 inch Macbook Air refresh, for it was about $50 cheaper than the Samsung 9 that it competed with. They both had similar hardware specs, look and feel etc. The brand new (just came out last week or so) Macbook Air flagship ultraportable was already being discounted at Bestbuy. Since when does Apple do that? Since they start scattershotting litigation against Android partners. Apple is getting serious about the competition (actually, they always have been, but not to this extent) and it is showing. They see the same potential for margin compression down the pike that I do, and that Google, HTC and Samsung does as well.

I actually decided to hold off (actually, i bought the Samsung, but am returning it) because Intel's Ultrabook initiative will have the first models roll back next month. Asus will have a slghtly lighter, slightly faster, slightly thinner machine than the Macbook Air for considerably under $1,000. I've seen them do it with netbooks (they created the category, which is what prompted Apple to create the iPad to avoid jumping into the margin compression netbook game), and they have done it with the Transformer. I know it can be done.

I've had the opposite experience. The iPad hardware was fine for a year (solid state, no moving parts, but the battery life dropped significantly when it got hot), but each and every of 4 ipods failed. Three harddrive and one touch, all within 2 years.

Alas, computers are computers but I love my Samsung and Asus tabs, and my htc phones and my B&N Nook - all of which run circles around their apple counterparts. Then again, I'm an advanced user that roots my hardware.

Asus is surprisingly badass, bought one of their gaming notebooks a few months back and have been very satisfied, loved the price too. They're kinda the Hyundai/Kia, they leave you wondering why the hell anyone buys anything more expensive.

I want my 'fully subsidized' Google car. After all, if I let them put ads on the touch screen, I should drive the car for free. So long as I look at ads on the gas pump LCD when I gas up, I should get my gas for free too.

Is this like your brillian call with everyone's finally realizing Apple's compressing margins that you crowed about when Apple was trading around 320 only to see it trade to over 400 after blowing the doors off earnings. You may have a track record somewhere else but it is certainly not with Apple.